With the next round of negotiations on the modernisation of the Energy Charter Treaty (ECT) fast approaching, the European Commission presented to Member States a revised version of its proposal to amend the Treaty definition of ‘economic activity in the energy sector’ on Friday 12 February at a meeting of the Council of the European Union’s ‘Energy’ working party.
Consulted by EUROPE, this new proposal is the result of discussions between the Commission and the Member States in recent weeks (see EUROPE 12646/7, 12655/6) in order to agree on the EU’s position on this section of the ECT.
The aim is to define which energy activities the EU believes should remain covered by the treaty before the fourth round of negotiations on the modernisation of the ECT between the 54 contracting parties (including the EU and all Member States except Italy) begins on 2 March.
CO2/kWh ceiling
The basic principle has not changed from the initial Commission proposal of 26 October (see EUROPE 12591/17).
The Commission is therefore proposing that the ECT should cease to apply to future investments in fossil fuels and fossil fuel power generation as soon as the revised ECT enters into force, but with a longer deadline for certain investments, depending on the CO2 intensity of those investments.
For example, the initial proposal suggested that investments in the production of electricity from oil gas and other hydrocarbon gases by means of power plants and infrastructure allowing the use of renewable or low-carbon gases and emitting less than 550 g of fossil CO2 per kW/h of electricity would still be covered by the Treaty until 31 December 2030.
According to the new proposal, the Commission seems open to lowering the CO2/kWh ceiling to 270 grams, a level close to what France had proposed (see EUROPE 12640/17). This would have the consequence of excluding more investment in ‘fossil fuel’ electricity generation from the scope of the ECT.
It remains to be seen whether this option will be supported by a sufficient number of Member States (EUROPE will return to this point). According to our information, at the meeting of the ‘Energy’ working party on 9 February, the Commission had indeed considered that the number of national delegations in favour of such a ceiling was not sufficient.
This was verified during Friday’s meeting, leading the Commission to propose a new ceiling of 380 grams, we have learned. According to our information, delegations would now have until Monday at 11:00 am to send written comments to the institution before the latter sends the EU negotiating position to the ECT secretariat for the 2 March negotiations.
Deadlines
As regards the second variable—i.e., deadlines—the Commission’s proposal has changed slightly.
In its initial proposal, it proposed not only the date of 31 December 2030, but also to extend this deadline to 31 December 2040 in two cases: – if these investments replace investments in coal and petrol-fired power generation; and – for future investments in gas pipelines capable of transporting renewable and low-carbon gases as well as hydrogen.
For these two cases, it now suggests that the provisions of the Treaty should apply “10 years after the entry into force or provisional application of the amendment to the Treaty, but no later than 31 December 2040”.
The same applies to investments in fossil fuels existing before the entry into force of the Treaty revision, while countries such as France, Austria, Spain and Luxembourg want to shorten this period to 5 years after the revision enters into force.
Hydrogen
In addition, the Commission proposes that reference to “low-carbon” hydrogen be added using the definition included in the EU Hydrogen Strategy.
This defines low-carbon hydrogen as “fossil-based hydrogen with carbon capture and electricity-based hydrogen, with significantly reduced full life-cycle greenhouse gas emissions compared to existing hydrogen production”.
Alignment with climate and energy diplomacy
Finally, as previously announced in our columns (see EUROPE 12646/7), the institution has also added several paragraphs taking up certain passages from the EU Council conclusions on EU climate and energy diplomacy adopted on 25 January (see EUROPE 12643/9).
The Commission’s revised proposal thus underlines that there is “urgent need for progress in the negotiations for the modernisation of the Energy Charter Treaty, with a view to driving an inclusive global energy transition in alignment with Paris Agreement objectives”. It also recalls that all but one (Turkey) of the contracting parties to the ECT have ratified this agreement.
In addition, it now states that “the EU is bound to discourage all further investments into fossil fuel based energy infrastructure projects, unless they are fully consistent with an ambitious, clearly defined pathway towards climate neutrality”. (Original version in French by Damien Genicot)